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Strategies & Market Trends : Value Investing
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To: pcyhuang who wrote (28308)11/12/2007 11:24:45 AM
From: E_K_S  Read Replies (1) of 78688
 
It appears that E*Trade had more exposure to these subprime loans than the market expected. Paul, your fears have proven correct over these secondary brokerage companies. It is hard to determine the exposure in any of these brokerage companies as they do not disclose the particular details in the debt they hold. When I confronted Schwab on this, the best they could provide me was their recent upgrade on their debt by Moody's. However this upgrade was from late last year, well before the issues with this caustic subprime debt.

E*Trade Gets Hammered
thestreet.com
From the article"...Shares of the online broker were plunging 29% to $6.12 in premarket trading.

The company said late Friday that it has seen continued declines in the fair value of its $3 billion asset-backed securities portfolio, predominantly within ABS collateralized debt obligations and second-lien securities. The total exposure to those instruments as of Sept. 30 was approximately $450 million, including about $50 million of AAA-rated asset-backed CDOs that were downgraded to below investment grade..."

E*Trade now down more than 52% from their close Friday based on this news. 60% of their consumer mortgage loans required no documentation. It looks like these loans were rated AAA too.

The article also stated that the SEC started an informal inquiry on Oct. 17 of its loan and securities portfolios. It seems that this is a bit late. SEC needs to be more proactive.

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EKS
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